Answer:
Capital Gain:
Capital gain arises whenever a capital asset such as stock, bond, and real estate etc. is sold for more than its original cost. There are two types of capital gain.
• Long-term capital gain: Long-term capital gain occurs whenever a capital asset is sold after holding such asset for more than 12 months.
• Short-term capital gain: Short-term capital gain occurs whenever a capital asset is sold after holding it for not more than 12 months.
Treatment of capital gain for tax purpose:
The capital gains (whether it is long-tern or short-term) are taxed at different rates and depending on the holding period of an asset. The following table tax rates attract on capital gain:
Answer:
Person JC married his wife Person LC on January 15, 2012. Person LC is a full-time student and also works in the library for $625/month.
Persons JC and LC would like to know how many personal exemptions they will be able to file on their tax return.
• An exemption is a deduction from AGI (adjusted gross income) on your tax return worth $3,700 per person in 2011.
• A taxpayer is allowed to claim an exemption for: themselves, as well as an exemption for their spouse and any dependents (children or supported relatives) for whom the taxpayer provides more than half of their total support.
Based on the above information, we can state that Persons JC and LC would be able to claim two personal exemptions on their joint tax return.
The general rule is that parents who are providing support for their dependent full-time college student children are able to claim them as exemptions, even over the age of 24.
However, because Person LC is married and will be filing a joint return, her parents will not be able to claim her as an exemption. A personal exemption can only be claimed once.
Answer:
Filling categories: There are five filing categories available to taxpayers and he or she can choose his or her category according to status. All the five categories are given below:
1. Single taxpayers: Unmarried or a person who was married previously and have legally separated from their spouses by either a separation or final divorce decree.
2. Married filing jointly : Married couple can file only one jointly tax return that combines their income and allowable deduction.
3. Married filing separately: Each spouse can file his or her own tax return and can show only his or her income, deduction, and exemptions.
4. Head of household: An unmarried or considered unmarried taxpayer who pays more than half of cost of keeping up a house for himself or herself and eligible dependent relative or child.
5. Qualifying widow or widower with dependent child: A taxpayer whose spouse died within 2 years of the tax year and who has a dependent child can use joint return tax rates and is eligible for the higher standard deduction.
Case when a married taxpayer chooses to file separate tax return:
When one spouse has a moderate income and substantial medical expenses and other has a low income and no medical expenses or very low medical expenses, then he or she can choose to file separate tax return for tax saving.
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